MANAGEMENT AGREEMENT
THIS AGREEMENT is made as of the 13th day of February, 1997 by and
among ESQUIRE COMMUNICATIONS LTD., a Delaware corporation, with offices at 000
Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Corporation"), Harlingwood &
Company, LLC, a California limited liability company (the "Manager") and Xxxxx
X. Xxxxx (the "Executive"). Manager and Executive each have offices at 000 X
Xxxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000.
W I T N E S S E T H :
WHEREAS, the Corporation desires to engage the services of Manager and
the Manager desires to accept such engagement upon the terms and conditions
contained in this Agreement; and
WHEREAS, Manager has agreed to provide its services hereunder
primarily through the provision of the Executive, one of its officers;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, the parties agree as follows:
1. TERM OF ENGAGEMENT
Subject to the terms and conditions set forth in this Agreement, the
Corporation hereby agrees to engage the Manager, and the Manager accepts such
engagement to provide management services, including corporate development
services to the Corporation and each of its subsidiaries for the period
beginning on the date hereof and continuing for a period of one year or until
earlier terminated as provided herein. Manager agrees to assign Executive to
this engagement, and Executive agrees to accept such assignment, to fulfill
Manager's duties hereunder, and in that regard, Executive's role will be in the
capacity of Chief Executive Officer of the Corporation.
2. DUTIES
2.1 Manager shall ensure that the Executive performs, and Executive
hereby agrees to perform, such duties and discharges such responsibilities as
the Chairman of the Board of Directors or Board of Directors of the Corporation
shall from time to time direct, which duties and responsibilities shall be
commensurate with the Executive's position as Chief Executive Officer, including
general review and integration of acquisitions and formulation of strategies to
enhance growth and profitability. The Executive agrees to perform such duties
and discharge such responsibilities in a faithful manner and to the best of his
ability. The Executive agrees to devote substantially all his business time and
attention to the business and affairs of the Corporation and its subsidiaries
and to use his best efforts to promote the interests of the Corporation and its
subsidiaries. The Executive further agrees that he will not engage in any
significant outside business concerns or activities, without the written consent
of the Corporation's Board of Directors, provided that Executive may sit on up
to two Boards of companies unrelated to the Corporation without the need for
such consent.
2.2 The Corporation shall use its best efforts to elect each of
Executive and Fir Xxxxxx as Directors of the Corporation and each of its
subsidiaries during the term of this Agreement. The Executive shall hold such
officerships in the Corporation and any subsidiary to which, from time to time,
he may be appointed during the term of this Agreement.
3. MANAGEMENT FEE
So long as the Manager is engaged by the Corporation pursuant to this
Agreement, the Corporation agrees that:
3.1 The Manager shall receive an annual management fee (the
"Management Fee") at the rate of $175,000 per annum, payable in semi-monthly
installments. Unless required by law, the Corporation agrees that it shall not
deduct or withhold from such payments any Social Security contributions and
income tax withholdings or any other amount. Any Management Fee payable
hereunder may be paid by subsidiaries of the Corporation, and not by the
Corporation, in such proportion as shall be allocated among them by the
Corporation and such subsidiary.
3.2 The Board of Directors of the Corporation shall grant to the
Manager a performance bonus (the "Bonus") of up to 50% of the Management Fee
payable hereunder annually within 90 days after the end of the Corporation's
fiscal year, upon the achievement of financial and operational objectives to be
agreed upon by the Manager, the Board of Directors and the Chairman of the
Board.
3.3 The Corporation shall insure that the Manager will be paid the
cost of providing benefits commensurate with the position of Chief Executive
Officer at the rate of $25,000 per annum, payable in semi-monthly installments.
In addition, the Corporation shall make a secretary available for use by the
Manager at the Corporation's offices.
3.4 Effective on the date hereof, the Corporation hereby grants to the
Manager under the Corporation's 1993 Stock Option Plan (the "Plan"), options to
purchase 150,000 shares of common stock at an exercise price of $9.00 per share.
Pursuant to a separate agreement to be entered into, the Corporation will sell
to the Manager 250,000 shares of Common Stock (the "Shares") at a purchase price
to be set forth therein, subject to the vesting schedule set forth below, which
purchase price will be evidenced by the Manager's promissory note in the
principal amount equal to the purchase price. Such note will have a four year
term and will be secured by a pledge of the Shares. The Corporation will have
the right to repurchase vested Shares at the greater of cost or fair market
value and unvested Shares at cost. This right may only be exercised in the event
this Agreement is terminated or expires, subject to the provisions of Sections 6
and 7 hereof. The Shares and options will vest 25% on the first anniversary of
the date hereof, with the balance vesting ratably on a daily basis over a period
of three years subsequent thereto, subject to acceleration of vesting upon the
sale of the Corporation or the sale by Golder, Thoma, Xxxxxxx, Xxxxxx Fund IV,
L.P. of more than 50% of the stock of the Corporation presently owned by it or
to which it is entitled. The Corporation will loan to Manager the funds to
exercise the options on terms similar to the terms above as they relate to the
purchase of the Shares. The grant of the options is subject to approval by the
stockholders of the Corporation of an amendment to the Plan increasing the
number of options which may be granted under the Plan.
4. REIMBURSEMENT FOR EXPENSES
The Corporation or its subsidiaries shall reimburse the Manager for
expenses which the Manager may from time to time reasonably incur on behalf of
and at the request of the Corporation in the performance of its responsibilities
and duties under this Agreement, provided that the Manager shall be required to
account to the Corporation for such expenses in the manner prescribed by the
Corporation.
5. TERMINATION OF ENGAGEMENT BY REASON OF DEATH
If the Executive shall die during the term of this Agreement, this
Agreement shall terminate automatically as of the date of his death and the
Corporation shall pay to the Manager the Management Fee and any other
compensation due under Section 3.2 or 3.3 hereof which would otherwise be
payable to the Manager up to the end of the month in which his death occurs and
no more.
6. TERMINATION OF ENGAGEMENT BY REASON OF DISABILITY
If the Executive shall become temporarily disabled during the term of
this Agreement, all of the Manager's rights under this Agreement shall continue
until such time as the Executive either returns to work or is deemed
"permanently disabled" (as hereinafter defined in Section 6.1).
6.1 If the Executive shall be deemed permanently disabled, the
Manager's engagement shall immediately terminate at such time that the Executive
is deemed to be permanently disabled. The Executive shall be deemed permanently
disabled for purposes of this Agreement if: (i) in the good faith opinion of the
Board of Directors, based solely on a duly ordered medical opinion by a
physician reasonably acceptable to the Manager and the Corporation, the
Executive is unable to render management services to the Corporation pursuant to
the terms of this Agreement for three consecutive months, or (ii) in the good
faith opinion of the Board of Directors, based solely on a duly ordered medical
opinion by a physician reasonably acceptable to the Manager and the Corporation,
the Executive is unable to render management services to the Corporation
pursuant to the terms of this Agreement for four months out of any twelve
consecutive month period.
7. TERMINATION OF AGREEMENT
7.1 TERMINATION FOR CAUSE
The Corporation may immediately terminate this Agreement in the event
that the Executive or Manager shall do or cause to be done any act which
constitutes "cause" (as hereinafter defined) for termination. For purposes of
this Agreement, cause shall be deemed to mean a material and continuing breach
by the Executive or the Manager of this Agreement, consistent neglect or refusal
to attend to the material duties assigned to them by the Chairman of the Board
or Board of Directors of the Corporation, gross negligence or willful misconduct
in the performance of their duties, dishonesty of the Executive or the Manager
to the Corporation (including, without limitation, conviction of a crime in any
court which could have the effect of causing the termination or suspension of
any license which the Corporation holds), conviction of a felony offense or
Executive shall no longer be an officer of or employed by Manager.
Notwithstanding the foregoing, the Manager shall not be deemed to have been
terminated for cause unless and until there shall have been delivered to it a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board of Directors of the Corporation
at a meeting of the Board called and held for the purpose (after reasonable
notice (which shall be at least 3 days prior notice) to Manager and an
opportunity for it to be heard before the Board), finding that in the good faith
opinion of the Board the Executive or the Manager was guilty of the conduct set
forth in the previous sentence and specifying the particulars thereof in detail.
Should this Agreement be terminated by the Corporation for cause, the
Corporation's only obligation shall be to pay the Manager its compensation due
to date under Sections 3.1, 3.2 and 3.3 of this Agreement and Manager may retain
all vested stock or other vested options, subject to the Corporation's right to
repurchase the same. Nothing contained in this Article 7 shall in any way waive,
restrict or prejudice the Corporation's rights and remedies in equity and at law
against the Manager with respect to the matter for which this Agreement is
terminated for cause.
7.2 TERMINATION WITHOUT CAUSE; GOOD REASON
This Agreement shall also terminate if:
(a) Manager is terminated (and this Agreement
is terminated)without cause;
(b) Manager terminates this Agreement for "Good
Reason";
(c) Manager terminates this Agreement without
"Good Reason";
(d) the term of this Agreement expires without
renewal.
The term "Good Reason" shall mean without the Executive's written
consent (i) a material change in the Executive's status, position or
responsibilities if, as a result of such change, the Executive could reasonably
be considered as constructively dismissed by the Corporation; (ii) a material
reduction by the Corporation in the Executive's incentives as in effect on the
date hereof or as the same may be increased from time to time during the term;
(iii) any request by the Corporation that the Executive participate in an
unlawful act or take any action constituting a material breach of the
Executive's professional standard of conduct; or (iv) any other material and
continuing breach of this Agreement by the Corporation.
7.3 RESULTS OF TERMINATION
If termination hereof occurs under Sections 5 or 6 (Death or
Disability) all shares, options and other rights which would have vested within
one year shall be deemed vested. In the event this Agreement is terminated by
reason of Sections 7.2(a) or (b), the Corporation shall within five days make a
lump sum payment to the Manager equal to 12 months of the annual Management Fee,
plus the cost of benefits as described in Section 3.3 and in such event Manager
and the Executive shall execute an appropriate release of claims against the
Corporation. Such lump sum payment shall be considered management fees, and not
damages, and Manager shall have no duty to mitigate. In addition, in such event,
all rights of Manager to receive common stock or to exercise options which have
previously been granted, including the rights in Section 3.4 hereof, shall vest.
8. CONFIDENTIALITY
During the course of this Agreement, the Manager and the Executive
will have access to and will gain knowledge with respect to all of the lines of
business of the Corporation, including service information, information
concerning customers, court reporters, and other valuable information relating
to the development, marketing and sale of services of the Corporation
("Confidential Information"). The parties also agree that covenants by the
Executive and the Manager not to make unauthorized disclosures of the
Confidential Information and not to use the Confidential Information after the
termination of this Agreement in a business in competition with that of the
Corporation are essential to the growth and stability of the business of the
Corporation. Accordingly, Manager and Executive agree that, except as required
by their duties under this Agreement, they shall not take, use, or disclose to
anyone in documentary form or through electronic media or otherwise, at any time
during or after the term of this Agreement, any Confidential Information
obtained by them in the course of their engagement with the Corporation.
9. NON-COMPETITION
9.1 During the term of this Agreement and for a period of 12 months
from the date of the termination of this Agreement in accordance with its terms,
the Executive and the Manager agree that they shall not directly or indirectly,
for their own account or as agent, employee, officer, director, trustee,
consultant or shareholder of any corporation or a member of any firm or
otherwise, anywhere within 100 miles of any office of the Corporation engage or
attempt to engage in any business activity which is the same as, substantially
similar to or directly competitive with the Corporation.
9.2 During the term of this Agreement and for a period of 24 months
from the date of termination of this Agreement in accordance with its terms, the
Executive and the Manager agree that they shall not, directly or indirectly, for
their own account or as agent, employee, officer, director, trustee, consultant
or shareholder of any corporation, or member of any firm or otherwise, solicit
the employment or retention of any court reporter retained by the Corporation or
any employee of the Corporation.
9.3 The Manager and the Executive acknowledge and agree that the
foregoing territorial and time limitations and restrictive covenants are
reasonable and properly required for the adequate protection of the business and
affairs of the Corporation, and in the event any such territorial or time
limitation is found to be unreasonable by a court of competent jurisdiction,
they agree and submit to the reduction of either said territorial or time
limitation or both, to such an area or period as the court may determine to be
reasonable.
10. RIGHTS TO DISCOVERIES
The Executive and the Manager agree that all ideas, inventions,
trademarks and other developments or improvements conceived, developed or
acquired by them during the term of this Agreement, whether or not during
working hours, at the premises of the Corporation or elsewhere, alone or with
others, that are within the scope of the Corporation's business operations or
that relate to any work or projects of the Corporation shall be the sole and
exclusive property of the Corporation. The Executive and the Manager agree to
disclose promptly and fully to the Corporation all such ideas, inventions,
trademarks or other developments and, at the request of the Corporation, they
shall submit to the Corporation a full written report thereof regardless of
whether the request for a written report is made after the termination of this
Agreement. The Executive and the Manager agree that during the term of this
Agreement and thereafter, upon the request of the Corporation and at its
expense, they shall execute and deliver any and all applications, assignments
and other instruments which the Corporation shall deem necessary or advisable to
transfer to and vest in the Corporation their entire right, title and interest
in and to all such ideas, inventions, trademarks or other developments and to
apply for and to obtain patents or copyrights for any such patentable or
copyrightable ideas, inventions, trademarks and other developments.
11. NOTICES
All notices and other communications given pursuant to this Agreement
shall be deemed to have been properly given or delivered at the time when hand
delivered, when received if sent by telecopier or by same day or overnight
recognized commercial courier service, or three days after being mailed, by
certified mail, postage prepaid, addressed to the appropriate party, at the
address for such party set forth at the beginning of this Agreement. Any party
may from time to time designate by written notice given pursuant to this Article
11 any other address or party to which any such notice or communication or
copies thereof shall be sent.
12. EQUITABLE RELIEF
The Executive and the Manager acknowledge that the Corporation will
suffer damages incapable of ascertainment in the event that any of the
provisions of Articles 8, 9 or 10 hereof are breached and that the Corporation
will be irreparably damaged in the event that the provisions of Articles 8, 9 or
10 are not enforced. Therefore, should any dispute arise with respect to the
breach or threatened breach of Articles 8, 9 or 10 of this Agreement, the
Executive and the Manager agree and consent, that in addition to any and all
other remedies available to the Corporation, an injunction or restraining order
or other equitable relief may be issued or ordered by a court of competent
jurisdiction restraining any breach or threatened breach of Articles 8, 9 or 10
of this Agreement. The Executive and the Manager agree not to assert in any such
action that an adequate remedy exists at law. All expenses, including, without
limitation, attorney's fees and expenses incurred in connection with any legal
proceeding arising as a result of a breach or threatened breach of Articles 8, 9
or 10 of this Agreement shall be borne by the losing party to the fullest extent
permitted by law and the losing party hereby agrees to indemnify and hold the
other party harmless from and against all such expenses.
13. MISCELLANEOUS
This Agreement shall be governed by the internal domestic laws of the
State of California, where the Manager and the Executive have executed the same,
without reference to conflict of laws principles. This Agreement shall be
binding upon and inure to the benefit of the legal representatives, successors
and assigns of the parties hereto (provided, however, that the Manager and the
Executive shall not have the right to assign this Agreement). All headings and
subheadings are for convenience only and are not of substantive effect. This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior negotiations,
understandings and writings (or any part thereof) whether oral or written
between the parties hereto relating to the subject matter hereof. There are no
oral agreements in connection with this Agreement. Neither this Agreement nor
any provision of this Agreement may be waived, modified or amended orally or by
any course of conduct but only by an agreement in writing duly executed by all
of the parties hereto. If any article, section, portion, subsection or
subportion of this Agreement shall be determined to be unenforceable or invalid,
then such article, section, portion, subsection or subportion shall be modified
in the letter and spirit of this Agreement to the extent permitted by applicable
law so as to be rendered valid and any such determination shall not affect the
remainder of this Agreement, which shall be and remain binding and effective as
against all parties hereto. For purposes of this Agreement, all references to
the Corporation shall include all subsidiaries of the Corporation.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HARLINGWOOD & COMPANY, LLC
By:/s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
ESQUIRE COMMUNICATIONS LTD.
By:_________________________
